Question

Designers need to design how to continue the air in a new building with a 40-year life. Four alternatives
are available, both of which have 20-year lives. Costs are given below. Use 12% interest rate.
A B C D
First Cost 90,000 60,000 85,000 72,000
SV in 20 years 10,000 8,000 12,000 9,000
Ann. Fuel
Cost
3,000 5,000 4,500 3,500
Ann. Maint.
Cost
2,200 3,200 1,800 2,400
Tax (%) of FC 3% 1.5% 2.3% 1.7%
a. What is the present worth of alternative D?(10 points)
b. What is the ROR of Alternative A?(10 points)
c. Which is the best alternative? Use ROR on additional investment.(20points)

Answer 1